Almost all of us have received a fraud call, and some may have even fallen victim to a phone scam. However, the actual cost of fraud goes beyond a monetary setback.
Whether you’re a business owner, a carrier, a subscriber, or simply a concerned citizen, understanding the cost of fraud calls can empower you to make more informed decisions, take protective measures, and know what to do when you’ve fallen victim to a voice scam.
So, what’s the real cost of fraud? In this blog, we’ll explore the cost of fraud calls and how it impacts businesses and consumers.
The most glaring impact of fraud calls is the victim's financial loss. Scammers employ a wide range of strategies to deceive their targets. For instance, they may impersonate legitimate business organizations like credit card companies, reputable mortgage companies, student loan entities - and even government agencies.
Research indicates that losses from payment card fraud were projected to reach $49 billion by the year 2023, with a continual and swift annual growth trend.
All these methods are designed with one goal in mind: to trick subscribers into giving away their personal or financial information. The consequences of falling for such scams can be severe. Victims can lose money, compromise access to their bank accounts, and even have their identities stolen.
Approximately 25.5% of the world’s population experienced identity theft last year, leading to global financial losses surpassing $1 trillion, as reported in a Global Anti-Scam Alliance and ScamAdviser survey. Phone calls emerged as the primary method for fraudulent activities, accounting for 61% of incidents.
Fraud calls pose a substantial threat to businesses as well. Scammers frequently target companies and pose as employees, customers, or even business partners to gain access to sensitive corporate information. They may also commit financial fraud or compromise the security of company data. Some of the most popular scams that businesses face include insurance scams, Google Business listing scams, and IRS scams.
The repercussions of these scams can be extensive – resulting in financial losses for the company, which directly hit its profitability and productivity. In fact, approximately 74% of companies experienced a decline in productivity in the previous year due to scams affecting their operations, staff, and clientele, as reported by cybersecurity firm Callsign.
These attacks can also cause damage to a company's reputation – impacting client trust and long-term market position. There are also legal liabilities to consider, further complicating the situation for the targeted business.
Carriers, businesses, and government agencies must invest in call center operations, fraud detection technologies, and employee training to address nuisance calls. Most small businesses in the US allocate 6% of their annual revenue to combat fraud, with mid-sized companies often investing up to 11%. The time and effort spent dealing with fraud calls can take away valuable resources that could have been used for other essential tasks. As a result, it not only affects companies financially but also causes a significant strain on their operations.
Fraudulent calls can have a significant impact on consumer trust. When individuals receive these deceitful calls, they may grow more and more skeptical of all calls they receive, even the legitimate ones. This loss of trust impacts their willingness to engage with businesses or government agencies over the phone. They might hesitate to share information or discuss matters over calls, which can hinder effective communication and operations.
Research indicates that 33% of consumers avoid companies linked to scams and 47% share such experiences with their network.
The psychological impact of falling victim to a scam call can be as damaging, if not more so, than the monetary loss itself. For example, immigration scams and the HMRC scam cause significant stress to victims, who may fear deportation or legal action if they do not comply with the scammers’ demands.
Regulatory compliance, legal, and law enforcement costs
Government agencies and regulatory entities are imposing strict regulations to combat fraudulent calls – creating more costs for compliance, legal processes, and law enforcement. One crucial regulation designed by the Federal Communications Commission (FCC) is STIR/SHAKEN. This policy aims to authenticate caller ID information to prevent spoofing, a common tactic in fraudulent calls.
These regulations are put in place to protect consumers and businesses. Still, compliance with these regulations requires significant investment in technology and infrastructure, adding another layer of cost for companies and carriers.
Addressing the global challenge of fraud calls
Hiya’s Q323 Global Call Threat Report identified a staggering 6.55 billion suspected spam calls between July and September 2023. The economic, social, and psychological ramifications of fraud calls resonate worldwide, making it imperative for concerted efforts to enhance security measures and protect individuals and businesses from the far-reaching consequences of scam calls.
Fraud calls are a global problem with significant financial, operational, and psychological impacts. To combat this issue effectively, individuals, businesses, subscribers, carriers, governments, service providers, and regulators must work together through prevention, detection, and enforcement measures.
Adopting advanced technologies and regulatory compliance are essential to mitigating the adverse effects of fraud calls - and the first step in rebuilding consumer trust.
While the fight against voice scams continues, we must stay vigilant and aware of them to protect ourselves, our subscribers, and the communities we serve. Together, we can combat this global epidemic and create a safer communication environment.